Finance advice

How property investors should handle the end of the financial year

By Julie Cumming

With just weeks to go before the end of another financial year, it’s important to review your investment portfolio, and strategise how you can minimise your tax bill and maximise your long-term savings.

Speak to your property manager and be proactive. Apart from being smart practice, it is wise to view your investment property as a ‘small business’ and do what is strategically important to maintain and improve output and efficiency. Surprising your tenants with improvements can also have a positive relationship effect. Consider any repairs and maintenance issues you may have been putting off or not aware of.

Tax deductions are an important part of cash flow. The rent, tax deductions and your personal contributions, are all required in the holding phase of your investment while you wait for the capital appreciation to occur over time.

The rent is fixed by the market, so this is an appropriate time to check if the current rent is in line with market trends or if needs adjustment when the lease expires or renews.

Tax deductions are legitimate to claim as a property investor, however they are, on their own, not a reason to invest. The more rent and deductions you can achieve, the less you need to contribute out of pocket.

Having a strategy session with your accountant now will enable you to see if there are any benefits in bringing forward tax-deductible expenses to the current financial year or perhaps pre-paying interest. It is essential to get sound, qualified advice on these matters that are specific to your personal circumstances from a property savvy accountant.

Repairs and maintenance vs improvements

It is important to understand the difference between repairs and maintenance and improvements to a property. This is relevant as you can claim an immediate deduction on repairs and maintenance if the property is rented, whereas improvements must be depreciated over time.

A repair is when you return something to its original state e.g. replacing damaged hot plates on a stove top.

Maintenance is money spent to prevent or fix deterioration like oiling a deck, painting etc.

An improvement is making something better than it was originally. For example, replacing an old oven to update a kitchen, often resulting in being able to ask higher rent or installing ducted airconditioning to replace split systems.

Generally, you can claim an immediate deduction on repairs and maintenance whereas, with improvements, you can claim either a capital works deduction or depreciation, depending on the type of improvement.

I recommend you have your property professionally managed and at the end of financial year, you will receive a financial statement that encapsulates all the financial transactions in one document.

Have your property manager pay all the outgoings, including statutory payments, body corporate and any repairs and maintenance. If you must top up their funds as expenses exceed income, this is generally easier to keep track of than random receipts.

A list of items that you can claim as immediate deductions includes:

  • Advertising;
  • Accountancy;
  • Cost of depreciation schedule;
  • Property management;
  • Statutory charges –  land rates, land tax, water;
  • Body corporate fees;
  • Gardening, pool maintenance;
  • Insurance;
  • Pest control (don’t forget to do this, particularly termite control);
  • Interest on loan (not principle payments);
  • Repairs and maintenance; and
  • Travel to inspect or to maintain.

What you can’t claim:

  • Travel expenses to visit your property;
  • When you use the investment property for personal use, a holiday home or have friends or family using the home free; and
  • Generally, the conveyancing costs of purchase are not tax deductible, rather they make up the cost base for capital gains purposes.

Getting a qualified quantity surveyor to prepare your depreciation schedule is the way to ensure this is done correctly. 

The ATO website Residential Rental Properties contains all you will need to know and is a great reference.

While you can always do your own tax return with the use of such tools from the ATO, I recommend you invest in a property accountant, which is a tax-deductible service itself, to ensure mistakes are not made and all possible deductions are accounted for.

As I have said several times, be proactive as an investor. I often see with investors a complacency and a lack of interaction with their property manager.

An active relationship with a property manager is essential to maximise your outcome by ensuring you are aware, and can capitalise on any available opportunity to maintain and improve your asset capital value and ongoing appeal to tenants. The same is true for your accountant.

Strategy planning is an investment to gain the best long-term outcome and navigate unforeseen changes and events personally and in the market place.

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About the Blogger

Julie Cumming

Julie Cumming

Based in Melbourne, Julie has been actively working in the property arena for over 12 years in diverse roles ranging from Shopping Center Manager and Commercial Property Manager to a qualified Investment Property Buyers’ Agent with a focus and expertise in the Brisbane market. Her experience in such mixed roles has given her a unique and broad property experience where she has identified opportunities within niche areas in the residential and commercial markets and developed services to meet those needs. Julie is a qualified property investment adviser (QPIA) accredited by PIPA, a licensed Real Estate agent in ACT, Victoria and Queensland. 

 

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  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

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  • The pitfalls that he has seen people get into<\/li>\r\n
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    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
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A property investment plan years in the making
object(stdClass)#1203 (52) {
  ["id"]=>
  string(5) "18287"
  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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